Technical Textiles - Techtextil India

Page 1 Techtextile – India Symposium : 30th – 31st October 2012

Knowledge Partner

Gherzi van Delden GmbH, Germany www.gherzi.com

Mumbai – October 30th and 31st, 2012

Technical Textiles

Techtextil – India Symposium

Are Joint Ventures or Strategic Tie-Ups

the Right Recipe for the

Indian Technical Textiles Industry?

http://www.gherzi.com/


11 bn USD

In 2012 the Indian Techtex industry is estimated by Gherzi at about 1/10 of the Techtex industry in China

Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?

Indian Techtex Industry Chinese Techtex Industry

Source: Gherzi research and estimates

116 bn USD

58‘000 Rs cr.

636‘3560 Rs cr.


The Indian Techtex market today is mainly focusing on Packtech, Clothtech and Hometech. Higher value added applications like Indutech or Medtech still have to be expanded, coming from a smaller base


World Techtex Market Structure Indian Techtex Market Structure (2010)

Source: Gherzi research

Packtech Clothtech Hometech Agrotech, Buildtech, Geotech, Indutech, Mobiletech, Oekotech, Protech, Sporttech

81 %

33 %

13 % 15 %

39 % 7 %

7% 5 %



India: Attractiveness (1)

Indian TechTex has recently seen major indigenous capacity investments without

support by a western tie-up or JV partner. Examples include:

Gini Filaments into spunlace nonwovens

Ahlstrom Gujarat into SMS nonwovens for gowns and drapes

SRF into High Tenacity PET yarns and downstream PVC lamination (signage) and PVC coating (tarpaulins)

Welspun into spunlace nonwovens

Arvind into glass fabrics and wide width technical wovens

Neocorp into wide width tape wovens

Techfab into geogrid and woven geotextile manufacturing

etc.




These investments demonstrate that India has reached the stage to become a major

player in Technical Textiles outside of the traditional Packtech segment

For the local market which seems finally to take off

For the international market which shows an increasing acceptance for India made products

After many years of focus chiefly on China, major foreign TechTex producers and converters have discovered India as the next growth market. Segments which should be the main focus of foreign interest include in Gherzi`s view:

Composites (wind energy, Mobiletech)

Automotive textiles (nonwovens and moulded parts, headliner, airbag, seat fabrics)

Hygiene (baby diapers, women’s hygiene)

Defence textiles

Specialty Geotextiles (like shore reinforcement)

State of the art crop protections / crop transport (Agrotech)

Contract home textiles for modern large scale offices in the Software, IT and BOP sector




The advantage of Indian firms being ‘a late entrant’ into the Techtex domain

(compared to China) is, that companies can directly invest into state of the art technology. However,

Factories must be conceived as flexible as possible (a maximum number of segments to be served from one manufacturing line)

Exportability of the product range constitutes an important asset to quickly fill a new, highly productive facility


Foreign investors in Indian Techtex have partially opted for a 100 % foreign owned local set-up …

Recent Techtex FDIs in India

Saertex India (D): Glass multiaxial fabrics (composites) Lear Corporation (USA): Tier 1 for Automotive

Ahlstrom (USA):

Nonwovens and specialty papers (Medtech) Autoneum (CH): Tier 1 for Automotive

Freudenberg Nonwovens India (USA): Interlining and

Industrial Nonwovens Brinton carpets (UK)

Autoliv India (D): Seat belts and Airbag Skaps (USA): Geotextiles

Bond Safety belts (Sicherheitsgurte) (D): Seat belts Meccaferri (I): Geotextiles

Johnson and Johnson (USA): Hygiene, Medtech TB Kawashima Automotive (Textile) India Pvt. Ltd

(recently announced) (J): Automotive

KOB Medical Textiles (D): Elastic Bandages (Medtech)


Source: Press Info


Foreign investors in Indian Techtex have partially opted for a 100 % foreign owned local set-up … (ct’d)

Recent Techtex FDIs in India

Procter and Gamble (USA):Hygiene Karl Otto Braun (D): Cotton gauze and wound dressing

(Medtech)

Kimberly Clark (USA): Hygiene MEP Olbo (D): Mechanical rubber good reinforcements

(Indutech)

3 M India (USA): Industrial and Medtech Madura-Coats (UK): Sewing thread (Clothtech)

LANEX (Seile and Gurte) (CZ): Ropes and belts Lindstrom (SF): Laundry rental (Protech)

TAKATA (J): Seat belts and Airbag BWF (D): Filter bags for hot gas filtration (Indutech)

Schoeller India (CH): Functional textiles Andrews (UK): Filter bags for hot gas filtration

(Indutech)

Wilhelm India (D): Laminated fabric for shoe industry Unicharm India (J): Hygiene


Source: Press info


… and partially opted for a tie-up with a qualified Indian counterpart

Source: Press info

Key foreign JVs / Tie-Ups in India – Technical Textile Field

Supreme NW / Textilgruppe Hof (D): Nonwoven interlining

(Clothtech) Kineco, Kaman Corporation (USA): Composites

KE - Burgmann Fibre India (D): Synthetic yarns (Indutech) Strata Geosystems India Pvt. Ltd, (USA): Geotextiles

Indo – Danish (Past JV mit KE Burgmann fibre) Hindoostan and TOHO (J): Carbon / Aramid composites

Harley Nirafon India and Keld Ellemtoft (for Filters) –

Finland Tata and Johnson Control, (USA): Automotive – Tier 1

Aunde (D) Faze 3: Automotive seat fabrics ATM and Colan (AUS): Glass Fabrics (Composites)

Supreme Treves nonwovens (F): Automotive interior

(Mobiltech) TRW (D) / Rane: Automotive Seat Belt

Treves Banswara Pvt Ltd (F): Automotive internal

furnishing (Mobiltech)

KSS(USA) / Abhishek Auto Ind. Ltd.: Automotive Seat

Belt, Airbag



… and partially opted for a tie-up with a qualified Indian counterpart (ct’d)

Source: Press info

Key foreign JVs / Tie-Ups in India – Technical Textile Field

H & V (USA), Nath group: HVAC filtration and battery

separator (Indutech) Lenzing (CH) Modi Fibres India Pvt. Ltd. - Fibres

Arvind, P.D. Group (D): Glass fabrics (Composites) Arvind - Du Pont (USA): Aramide fabrics (Protech)

Kusumgar Corporates, Saati (Italy): Protech Arvind - Rhodia (F): Cotton FR Proban (Protech)

DSM (CH), Kemrock: Specialty composite resins Vardhman - A&E (USA): Sewing thread (Clothtech)

Loyal Textiles & M/s. Gruppo P&P Loyal SpA and

Schaefer Loyal (I) and (D): Workwear



In some cases Indian firms have ventured abroad to acquire know-how and market access through M & A

M & A

S. Kumars Ltd (takeover of Klopmann) – Italy

Neo Corp International Ltd (takeover of Europlast) – UK

Binani Group / Goa glass fibre (3 B takeover) – Belgium

SRF Belting division (takeover of Industex) – S. Africa

Alok Protech & Workwear division (takeover of Mileta) – Czech Republic


Source: Press info



The right approach Entering into new Techtex market segments requires

a) Know-how

b) Investment in a manufacturing technology suitable for product certification to international

norms and

c) Customer access (locally and abroad)

A tie-up with a foreign partner can – but most not always and in every case – supply answers to the missing market entry skills described above


Acquisition of market entry skills: Four different cases


Indian Producer

Targeted Market


Small to Medium Enterprise

Larger enterprise

Developed Indian market Packtech, Hometech Clothtech

Market less developed in India All other Techtex segments

Stand alone or licensing / distribution

agreement

Tie-up or Joint Venture for local market

and global exports

Stand alone approach or M & A

Tie-up or Joint Venture for local market development


Case 1 Small to medium enterprise: Packtech / Hometech / Clothtech market focus


Issues to deal with:


Why only licensing or distribution agreement required? Large Indian market allows for scale without foreign partner Penetration of higher end segments (FDA approved,

pharma, …) requires skills best supplied, however, through a tie-up

Potential interest for foreign partner in tie-up with Indian firm? Large size of Indian market Quick market entry through tie-up

Scalability? Limited, as foreign partners will try to limit JV scope to India


Case 2 Large enterprise: Packtech / Hometech / Clothtech market




Why stand alone approach? Combination of larger Indian firm plus large domestic market

allows for trading-up into higher end markets without foreign partner support

Scalability? Yes – going global might best be achieved through M & A

(acquisition of foreign distributors or smaller producers)


Case 3 Small to medium enterprise: All other segments




Why tie-up for local market? Development of a foothold in emerging Indian market requires

product and technology know-how often not available to Indian Techtex producers

Interest for foreign partner? Small, but rapidly developing Indian market

Scalability? Limited, as foreign partners will try to limit JV scope to India


Case 4 Large enterprise: Tie-up for local market and global exports




Why tie-up for local market and global exports ? Investment in high performance western manufacturing

technology requires global sales to fill the plant

Interest for foreign partner? Small, but developing Indian market Low cost base for global exports

Scalability? Yes, if world market can be targeted



Route to success (1)

Set the goals:

Which product / market segment

Attractiveness of a tie-up for foreign partner

Type of transaction: • Off-take • Strategic alliance or licensing • JV

Long list of suitable partners:

Prio 1: Optimum fit – optimum size

Prio 2: Suited but less optimal

Investment Memorandum:

Presentation of the Indian market and Indian partner profile

Attractiveness of the transaction for the foreign partner

Ideal transaction structure

Initial approach:

1st contact

NDA

IM sent

1st meeting




Short list:

Limited number (1 – 3) of tie-up partners for further negotiations

LOI / MOU:

Agreement on transaction ‘subject to’

Pre-Contract:

Joint business plan

Detailed transaction structure

Due diligence

Initial Approch




Legal and tax:

Certifications

Licenses

Legal contracts

Closure



Success factors In Gherzi’s experience the following criteria are important to successfully close a transaction Show the attractiveness of the project for the foreign partner

Identify the right partner and approach the right person on a personal level

Build trust in a series of successive meetings

Respect need of western partner to protect his IP

Involvement of an experienced consultant often helps to achieve these aims



Conclusion (1)

Not always is a tie-up required to build up a successful business in Technical Textiles.

A number of Indian firms have followed a stand alone approach

Typically, foreign partners are mainly interested in the Indian market. The market is, however, still small outside of the … Packtech Hometech Clothtech

… segments



Conclusion (2)

A thorough analysis of the right partner to be approached helps to avoid

disappointment lateron in the process

A clearly defined product / market focus and set of goals accompanied by a professionally worked out investment memorandum helps to attract the interest of a foreign partner

It is important to

a) build trust between the parties in the series of negotiations and

b) agree on a joint business plan in order to close the transaction in a manner satisfying both the Indian as well as the foreign party



Thank you very much

Any questions?

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